Navigating a Highly Protected Market: China’s Chery Automobile in Malaysia

ABSTRACT

The economies of Malaysia and China have become increasingly integrated through trading and investment linkages. This article focuses on one aspect of this relationship, examining Chery, a Chinese car maker, and its internationalisation strategy and its localisation efforts in Malaysia. It does this by analysing Chery’s interaction with the host government, local partners and suppliers. Using an in-depth case study, it was found that Chery’s experience in navigating a set of complex state–society relations in Malaysia resulted from an adaptation of its business strategy to address protectionist and institutional constraints found in Malaysia. However, while relations between Chery, the local partner and government agencies have grown strongly, few interactions have evolved between Chery and local suppliers and national research and development facilities, limiting collective learning processes and production collaboration in Malaysia. The evidence also suggests that Chery’s present conundrum of low sales in the country could be solved through negotiations with the Malaysian government so as to evolve mutually beneficial partnerships with national automotive makers. The Malaysian government may also consider easing its protectionist measures to allow more foreign participation into the auto sector to stimulate growth and competitiveness.

KEYWORDS:

• Outward investment
• Chinese multinationals
• automobiles
• Malaysia
• China

Acknowledgements

We are grateful to Economic Research Institute for ASEAN and East Asia (ERIA) for their support in conducting this research. The authors thank the late Lee Poh Ping, Kevin Hewison, Cheong Kee Cheok, Terence Gomez, Tham Siew Yean, Michael Connors, and the two anonymous reviewers for their valuable comments and constructive suggestions.

Disclosure statement

No potential conflict of interest was reported by the author.

Notes

1. Primary qualitative information was mainly collected from open-ended interviews through the use of a check list, which was structured based on a coherent theme. The interview questions were designed according to the respondents’ characteristics and were provided to the interviewees for preview prior to actual face-to-face conversations. Respondent selection was based on a set of criteria that took account of task responsibility, reliability and relevance to the topic. For example, we avoided the use of Chery executives to connect us to the authorised dealer so as to minimise the bias in the responses by the latter. The discussions were based on largely open-ended questions for these allow the respondents freedom to express themselves with a number of potentially unanticipated details. As argued by Doyle (2003), the objective of case study is interpretive rather than predictive.

2. Obtaining interviews with many of these employees and officials is a time-consuming task. Both groups are busy and focused on their regular tasks and not always willing or able to meet with interviewers.

3. As will be seen below, Chery did import its small cars for sale in Malaysia.

4. Toyota and Honda sold almost 6,200 and 11,000 in March 2017 alone (Malaysian Automotive Association 2017).

Additional information

Funding

This work was supported by the University of Malaya [High Impact Research Grant No. UM.C/625/1/HIR/ASH/031].